Interest on borrowings for business machinery remained deductible despite non-use of the asset

Interest paid on borrowings used to purchase machinery intended for business use was held allowable as a deduction, even though the machinery was never actually put to use in the assessee's business at the assessment stage. The decisive factor was that the asset was acquired as a business asset for business purposes, so actual use of the machinery was not treated as determinative. The claim was therefore allowed in favour of the assessee.

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Issues: Whether interest paid on loans taken for purchase of machinery, which was never actually used in the assessee's business, is allowable as a deduction in computing taxable income.

Analysis: The machinery was acquired as a business asset for business purposes. Actual use of the machinery at the time of assessment was not treated as decisive where the borrowing was for purchasing an asset meant for the business.

Conclusion: The interest paid on the borrowed amount was an allowable deduction. The finding was in favour of the assessee.

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